Strangled credit growth to choke banks

Ho Chi Minh City-based Western Bank proposed a 14 per cent hike in its 2012 profit target, according to a bank representative. In 2011, the bank saw a 148 per cent jump in pretax profits against 2010 which mounted to VND161 billion ($7.6 million).

Western Bank is among the group II banks with allocated credit growth targets of 15 per cent in 2012.

DongA Bank, DaiA Bank and Orient Commercial Joint Stock Bank (OCB)- all got 15 per cent credit growth indexes in 2012- proved cautious with their full-year profit targets.

Accordingly, this year Orient Commercial Joint Stock Bank (OCB) aims to achieve VND550 billion ($26.2 million) in pre-tax profits, slightly more than 2011’s projection. Last year the bank just posted VND450 billion pretax profits tantamount to 80 per cent of the year’s projection.

“Multiple challenges face banking operations in 2012, including contained credit growth which could directly influence performance,” said OCB’s general director Trinh Van Tuan.

DaiA Bank contemplated raking in VND600 billion ($28.5 million) in profits, up 11 per cent against 2011 whereas last year the bank’s pretax profits of VND502 billion ($23.9 million) almost tripled that of 2010.

DongA Bank plans to hike its chartered capital from VND4.5 trillion ($214.2 million) to VND6 trillion ($285.7 million) and post VND1.650 trillion ($78.5 million) in aggregate profits against VND1.255 trillion ($59.7 million) in 2011.  

The central bank’s setting of 2012 credit growth targets based on bank groups have pressured banks’ 2012 business targets, particularly profit targets. In fact, lending is a leading income-raising source for Vietnamese banks, contributing 80-90 per cent to small banks’ profits. Hence, contained credit growth would surely hurt banks.

“Our bank just reaped slightly more than half of 2010’s profits in 2011 with 20 per cent credit growth as approved by central bank last year. With just 8 per cent assigned credit growth in 2012 we will face mounting dividend pressures in 2012,” said the deputy general director of a small group III bank.

With 2012 credit growth contained, interbank market lending operations have been in the blues in the recent months.

“Our bank recently could not reap profit from this business on the back of weak demand,” said an ACB executive, adding that lending in the inter-bank market was almost ‘frozen’ in the past months.